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CIMA BA1 - Fundamentals of Business Economics

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Total 468 questions

Company X is a wholesaler. It sells the majority of its products in bulk to a small number of restaurants and cafes in the local area.

Which of the following will Company X experience in light of this?

Select ALL that apply.

A.

A reduction in distribution costs as a result of economies of scale

B.

A reduction in the number of staff needed to perform certain roles within the company

C.

The company will not be able to buy in bulk at a discount in the future

D.

The company will not be able to maximise efficiency due to rapid business growth

E.

It will not experience the benefits of economies of scale

The government of Vencia has set out in its Budget a restrictive set of fiscal policies. These include raising VAT and the basic rate of income tax to 25%. The Bank of Vencia must now implement this Budget as monetary

policy.

Which of the following best outlines how the Bank of Vencia might do this?

A.

Halt all ongoing quantitative easing programmes, buy bonds at a higher interest rate and sell treasury bills

B.

Implement quantitative easing programmes, sell bonds and buy treasury bills

C.

Lower the capital adequacy ratio, increasing banks' lending power

D.

Implement quantitative easing programmes, buy bonds and treasury bills

Other things being equal, an increase in a country's balance of payments deficit on current account means that

A.

Import prices must be falling

B.

The volume of goods exported must be falling

C.

Aggregate demand is falling

D.

The difference between government spending and tax revenue is growing

TrowPlan Ltd. is planning on growing their business through expanding their real estate holdings. In order to do this, they have taken out a bank loan of £2 million. This loan is to be repaid by TrowPlan Ltd. over a period of

14 years with an interest rate of 10%. However, there are rumours of recession in the banking sector, and the economic uncertainty caused by Britain's vote to leave the EU continues to decrease the value of pound

sterling.

In these circumstances, which of these options would be the least suitable course of action for TrowPlan Ltd. to take?

Select ALL that apply.

A.

Take out the loan without any guarantee or security so as to see whether interest rates lower in the near future

B.

Take out an interest rate guarantee and wait until the economic situation becomes clearer before taking out a Forward Rate Agreement

C.

Take out a Forward Rate Agreement to fix the interest rate repayable on the £2 million loan

D.

Take out an interest rate option and wait to buy an interest rate future until the economic situation becomes clearer

E.

Buy an interest rate future in order to fix the interest rate repayable on the £2 million loan

The component bar chart displaying sales revenues for different types of product sold by Pills Pharmaceuticals shows that the poorest performing products are its medical devices.

Which of the following may be reasons for this?

Select ALL that apply.

A.

The company does not specialise in selling medical devices to hospitals

B.

The company has only recently started to develop and sell medical devices and equipment

C.

The company may be winding up its development and distribution of medical devices and equipment

D.

The company may be facing a public relations crisis which is turning away members of the public who would

E.

otherwise be interested in buying these products

F.

The company may be involved in a standards dispute in terms of over-inflated prices for its medical devices

Vencia has recently been faced with international condemnation due to its tendency to engage in 'dirty floating'. This is combined with high interest rates as well as underdeveloped industries.

What would likely be the result of these conditions on Vencia's trade?

A.

A lack of investment from businesses in the long-term

B.

Some investment in the short-term due to high interest rates

C.

Other countries responding to Vencia's 'dirty floating' in a protectionist manner

D.

The Bank of Vencia buying treasury bonds to loosen its monetary policy

E.

The government of Vencia increasing its VAT and basic rate of income tax further

Which of the following statements is always true for a merit good?

A.

It is characterized by non-excludability and non-rivalry

B.

When consumed, the social benefits exceed the private benefits

C.

Zero negative externalities result from the consumption of a merit good

D.

It is provided free by the government

Which ONE of the following statements best describes the impact of a government minimum price established above free market price?

A.

It will create a shortage of the product and incentives for producers and consumers to evade the policy

B.

It will create a surplus of unsold produce and reduce farm incomes

C.

It will not affect market price or producer incomes at the present time

D.

It will increase farm incomes but may eventually force the government to introduce maximum quotas on production

If a firm wishes to maximize market share without incurring a loss, it should set its price where

A.

Marginal revenue is zero

B.

Marginal revenue equals marginal cost

C.

Price equals marginal revenue

D.

Total cost equals total revenue

Which ONE of the following statements about the 'divorce of control from ownership' is true?

A.

If an organization is controlled by managers, profit will no longer be an objective for business organizations

B.

Issues of corporate governance would not arise if shareholders had effective control of business organizations

C.

Remuneration schemes for directors which are linked to share prices encourage the divorce of control from ownership

D.

Managerial objectives are likely to be related to the size and growth of the organization rather than shareholder value